WASHINGTON — The Supreme Court’s recent rulings in three state-federal jurisdictional cases provide only limited guidance for how it might decide future turf disputes, a panel of attorneys agreed in a discussion at the Energy Bar Association’s Annual Meeting last week.
They disagreed, however, over whether the court should be praised for its diffidence.
The panel focused on the court’s April ruling in Hughes v. Talen and its January order in Electric Power Supply Association v. FERC, with mentions of the 2015 ruling in ONEOK v. Learjet.
The court backed FERC’s authority in both of the most recent cases — upholding its jurisdiction over demand response in EPSA and rejecting Maryland’s subsidy of a generator that could have undermined PJM’s FERC-regulated capacity auction.
But FERC General Counsel Max Minzner isn’t letting the victories go to his head. The court’s ruling in Hughes v. Talen was “a very narrow decision,” Minzner said. (See Supreme Court Rejects MD Subsidy for CPV Plant.)
The court unanimously rejected Maryland’s contract-for-differences with a natural gas plant, saying it violated the Constitution’s Supremacy Clause, which establishes that federal law preempts contrary state law (14-614, 14-623).
Minzner said the ruling preserved “a wide range of tools for states to incentivize or affect generation” but found the Maryland program improper because it interfered with FERC’s jurisdiction over wholesale electric markets and could distort price signals in PJM’s annual capacity auctions.
“The court, I think, was clear that a significant number of traditional state activities that could in theory have an impact on the wholesale rate are likely to be preserved after Hughes,” Minzner said. “There was a long discussion at the end [of the opinion] about the range of things the states can do without running afoul of this specific problem.”
Connecticut Assistant Attorney General Clare E. Kindall, who co-authored an amicusbrief in Hughes, said she was “relieved to hear that FERC’s general counsel thinks it’s a narrow ruling.”
“I believe that the Supreme Court did narrow the 4th Circuit’s original holding [against Maryland]. But I also think the Hughes case and this trio of cases is a full employment act for this group [lawyers] for the next 10 years, because I think there will be a lot of litigation over what exactly a state can and cannot do,” she said. “There is a role for FERC and there’s a role for the states. And this room will spend most of the next 10 years drawing those lines.”
Dentons partner Stuart A. Caplan, who moderated the discussion, echoed Kindall’s comments, complaining of “an unsatisfying lack of clarity in the decisions as to the basis of jurisdiction.”
Bancroft partner Erin E. Murphy, a member of Talen’s legal team, agreed that the rulings are “hardly going to put an end to litigation.”
“The court was trying to avoid drawing particularly bright lines or giving a whole lot of guidance. It really had to approach each of the cases as: ‘We’re going to decide precisely what’s before us and not say a whole lot more than that — which isn’t all that unusual for how the court operates, particularly when it’s dealing with an area like this that the court knows it’s not the body with the great expertise.”
Kindall lamented that the rulings did nothing to answer a policy question: “whether markets answer all questions.”
“The markets have done a tremendous good,” she said. “Connecticut is deregulated and [I] was a little offended by the idea that the only way to ensure reliable energy was to reregulate, which was one of the suggestions in Hughes. That struck us as a really wrong tack to take. … The question becomes, if you have a market failure, how do you address it? That will have to be a [discussion] between the federal agencies and state agencies.”
Not Identical
Minzner distinguished between the EPSA ruling, which he said was about the scope of the Federal Power Act, and the other two cases, which deal with “core Constitutional” questions about the meaning of the Supremacy and Commerce clauses.
“Those are related questions but I don’t think they’re identical,” he said.
“I think that was really what was guiding [the court] — and the fact that the states weighed in. They weren’t there saying protect their jurisdiction. … [They] said FERC absolutely should be able to do this as well [as the states]. You can sort of slice and dice all the legal analyses, but I think at the bottom that was what was really going on.”
“We did have a few states on our side too,” Murphy interjected, prompting laughter. But she said she agreed with Kindall’s analysis.
“When you look at the way the court was thinking about it … this is happening in FERC’s market, and how else can we make sure that this happens in FERC’s market if FERC can’t control it? Which is a little bit divorced from a starting principle of: ‘Is it wholesale or retail?’”
Caplan said he believed the Hughes ruling was based on broad “field preemption” grounds — that it was an intrusion into exclusive federal jurisdiction — rather than the narrower “conflict preemption” — that it undermined FERC policy.
“It seemed that the court explicitly declined to consider what the effects on the wholesale market were, which would have been necessary if the courts were applying the conflict preemption,” he said.
Murphy and Minzner agreed that the ruling seemed to be based on field preemption.
Murphy also offered a defense of the court’s refusal to draw bright jurisdictional lines. “While I think it’s frustrating to people who practice to not have this clear guidance from them … I do think that [the court’s] reluctance to provide it is animated by their decision that it’s better to not give totally clear guidance than to mess it all up in an area that they don’t understand as well as all the people in this room do.”
“A refreshing breath of humility,” Caplan quipped.
After allegations of management interference led PJM to replace its internal market monitoring unit with an independent monitor in 2008, FERC had an opportunity to prohibit other RTOs from using the internal structure. Because it chose not to do so, the temptation for RTO officials to muzzle their MMUs remains.
Oversight Committee Chairman Says He Can’t Remember Many Details in Controversy
Third in a Series
By Rich Heidorn Jr.
FERC auditors, who have been examining allegations that SPP officials interfered with the independence of its internal Market Monitoring Unit, effectively ended their audit at the end of April without interviewing a key witness.
That person is Joshua W. Martin III, the chairman of the SPP Board of Directors’ Oversight Committee, which is charged with supervising the unit and protecting its independence.
Former SPP monitors Catherine Tyler Mooney and John Hyatt, who were fired in December, had asked to meet with Martin last September to discuss their frustration with the internal MMU structure and recommend a role for an external monitor. The monitors told Martin that pressure to please RTO management and conform to the positions of membership made it impossible to exercise the independence required by FERC.
SPP Board of Directors’ Oversight Committee Chairman Joshua W. Martin III refused to meet with former monitors Catherine Mooney and John Hyatt when they raised concerns about the independence of the internal Market Monitoring Unit, referring them to Alan McQueen, a target of their complaints, and General Counsel Paul Suskie.
Martin, however, refused to meet with them, telling them to talk instead to General Counsel Paul Suskie and their direct supervisor, MMU Director Alan McQueen, who was the target of some of their complaints.
Hyatt and Mooney say they were terminated for their efforts to exert independence. SPP officials have declined to give a reason for the firings, citing RTO policy not to publicly discuss personnel matters.
FERC announced in February 2015 it was conducting an audit of SPP that included an examination of the MMU’s independence under Order 719 (PA15-6).
Yet the auditors effectively ended their 13-month inquiry without interviewing Martin, the single most important person to the protection of the MMU.
SPP said that FERC auditors conducted an exit interview April 29 with RTO officials, including Suskie and McQueen, at which they outlined their conclusions.
“FERC auditors did not indicate any findings that SPP’s MMU is not independent nor did the auditors indicate that SPP’s MMU should be an external market monitor,” SPP said in a statement. “We do expect FERC to issue recommendations for enhancements to SPP’s MMU similar to those approved [in a revised policy statement on the MMU] by SPP’s Board of Directors in January.”
FERC declined to comment.
Martin said in an interview May 2 that although he met FERC auditors at an Oversight Committee meeting in D.C. last March, “this was not an in-depth session where we were looking at specifics. They were just giving us an indication of the scope of the audit, how it was going to proceed,” he said.
Had it interviewed Martin, FERC would have found a board member seemingly detached from — or forgetful about — many of the details of the controversy surrounding the MMU.
Oversight Committee Role
Mooney
Attachment AG of SPP’s Tariff specifies that “the Market Monitor shall be an organization within SPP reporting to the Board of Directors, excluding any SPP management representatives serving on the Board of Directors.” (Emphasis added.)
The MMU reports in particular to the board’s Oversight Committee, which is composed of three outside directors led by Martin.
Despite the Tariff’s prohibition against “SPP management” having an oversight role, RTO executives were regularly present when McQueen reported to the committee, according to committee minutes reviewed by RTO Insider.
In 2013 and 2014, for example, McQueen’s direct supervisor, Stacy Duckett, vice president and chief compliance officer, usually recorded the minutes as the committee’s secretary.
Duckett died in March 2015 following a long illness. Suskie, who succeeded Duckett as McQueen’s supervisor, also attended meetings as secretary, as did Michael Desselle, vice president and chief compliance and administrative officer.
An SPP organizational chart shows McQueen reported to Duckett and, later, Suskie for “administrative purposes.” Until recently, that included requests to hire new staffers, budget and organizational reviews, and McQueen’s salary and bonus reviews.
Hyatt and Mooney say that when they pushed to oppose a position held by the RTO or members, McQueen often resisted, complaining, “You don’t understand the pressure I’m under.” McQueen declined to say whether he had made the remark. (See Part 1: SPP Squelching MMU Independence, Former Monitors Say.)
How could McQueen tell the Oversight Committee of such pressure when SPP management was present during the meetings? “We’ve been very, very open,” Martin said. “Alan’s communicated with me without management being there — through emails, through voice mail.”
Larry Altenbaumer and Phyllis E. Bernard, the other two members of the committee, declined requests for comment, referring questions to Martin.
Judge, Regulator, CEO
By any measure, Martin is an accomplished figure. A one-time civil rights activist in Camden County, N.J., he studied physics as an undergraduate before becoming a patent attorney for Hercules, a chemical manufacturer. He later served on the Delaware Public Service Commission (1978-1982), including three years as chairman, and became the first African American member of the Delaware Superior Court (1982-1989).
He retired from the bench to become general counsel of Bell Atlantic Delaware, rising to CEO of the company, which was renamed Verizon Delaware (1996-2005).
He has now come full circle. In 2005, he become a partner at Potter Anderson & Corroon, a venerable Wilmington, Del., law firm founded in 1826, whose office is in Hercules Plaza, an office tower that once housed 1,800 Hercules employees. He retired as a partner at the end of 2013 and remains with the firm as counsel.
It was in his seventh-floor office, with a commanding view that reaches New Jersey, that Martin sat down for an hour-long interview with RTO Insider.
Martin, who has been an SPP board member since 2003, forcefully defended his decision not to meet with Hyatt or Mooney and said he agreed with the decision to fire them.
He also insisted he had seen no evidence that the MMU was being pressured by executives to conform with RTO and stakeholder desires on market rules, as the two monitors contend.
But Martin said he was unable to answer numerous questions about the controversy, repeatedly answering with variations of “I don’t know” or “I don’t recall.”
He acknowledged that Potomac Economics — in addition to performing the functions formerly done by Mooney and Hyatt — is also doing an audit of the MMU, but said, “I don’t know the scope.” He also said he did not know when McQueen, whose retirement was announced in January, would be leaving. And he hasn’t seen a job description for McQueen’s replacement.
Below are excerpts from RTO Insider’s interview with Martin.
Martin was asked about the reasoning behind the Oversight Committee’s revised policy statement on the MMU’s independence.
The new statement makes the committee responsible for all salary and bonus decisions for McQueen and other MMU employees and ensured that the MMU director could meet the committee in executive sessions without RTO officials present.
Who was responsible for Alan McQueen’s salary and bonus evaluations [before the revised statement]?
“It would have gone to the board — and then through the administrative process of SPP — and to the board. That’s my assumption.”
You say you assume it went through the board. You’re a member of the board; why wouldn’t you be aware of it?
“I just don’t remember specifically. It wouldn’t have been significant enough for me to have that in my brain. But considering the fact that it had to go somewhere, and it didn’t come through the Oversight Committee specifically like it did this year, my assumption is it would have been in that package of compensation increases for the entire organization.”
And where did that package come from? That would have come from RTO management, right?
“Oh sure, human resources, RTO management, Human Resources Committee — all of that.”
So then is it fair to say that up until this most recent year and this change where the Oversight Committee was involved, that Alan McQueen’s compensation was being determined or recommended, at least, by RTO staff, RTO management?
“As best as I can recall, that would be accurate.”
Was there a realization that that was not compliant with Order 719? Is that why you changed it?
“Not to my knowledge. I don’t know that the issue was ever raised. It wasn’t raised with me.”
Martin went on to suggest that SPP might not have been in violation of Order 719 because the order allows the MMU to report to RTO management for “administrative purposes, such as pension management, payroll and the like.”
Payroll seems to me to be a more ministerial function — like how many deductions do you want taken out [of your paycheck] as opposed to supervision, which is: Are you doing a good job? Should you get a bonus? Should you get a raise this year?
“To be fair about this, assuming that there was some need for clarification on that, that was probably the genesis of the change that was made” regarding compensation.
You say it was probably the genesis, but you were there. You are the chairman of the committee. Wouldn’t you know what the genesis was?
“Well, here’s what I’m trying to distinguish. It wasn’t that we had FERC standing over us saying, ‘You must do this.’ But we looked at the situation concerning the independence of the MMU and we accepted certain changes that would make it clear that they were independent and that was one of them.”
When did those discussions start as to changing the statement?
“Good question. I can’t answer that. I just don’t know specifically when they started.”
What’s your first recollection? Who suggested it?
“I don’t remember that either. I can tell you that those discussions were ongoing in 2015. But I can’t tell you what the initial impetus for that was. It may well have been Alan McQueen who said, ‘I think we need to take a look at how the MMU operates versus the board and the Oversight Committee.’ But I can’t be specific on that. I just don’t remember.”
Martin was asked about the letter Hyatt and Mooney sent him in September.
What do you recall about that?
“What stood out for me more than anything else in that letter was the fact that there was this issue of a contract that they wished. And obviously directors do not negotiate contracts with employees. For that reason, I referred them to staff, specifically to the SPP general counsel, Paul Suskie.” [Editor’s Note: The letter recommends some MMU functions be transferred to an external monitor, which Hyatt and Mooney offered to join. It does not mention the word “contract.”]
The mention of the contract was why you chose not to meet with them? Even to talk about more generic issues?
“That stood out to me more than anything else because I’m very careful about my role as a director. Even though Southwest Power Pool is structured differently from a lot of organizations I’ve been associated with, the last thing you want is directors poking their noses in places where they shouldn’t be poking their nose in — namely operational issues.
“We’re supposed to set policy for the organization. And I felt that what I was being asked to get involved in there was beyond the scope of my role as chairman of the Oversight Committee. So I referred them to Paul Suskie, who … was general counsel and would be able to address whatever issue they wanted to advance.”
They have told me that Alan McQueen, their boss, was … preventing them from acting as independently as they thought the MMU should act. And they say that you telling them to go back and meet with McQueen and Suskie … was not in the spirit of you providing oversight for the independence of the MMU.
“Let me be very clear with you. If the issue were that simple — i.e., if they were coming to me purely to address the question of independence — we would have had a different situation. My analysis of what I was being asked to get involved in went beyond that and therefore I took the position that as a director and as chairman of the Oversight Committee, I should not get involved in that discussion and that’s why I referred them to the general counsel.”
Couldn’t you have bifurcated the discussion? Say I’m not going to talk about contracts or what the solution is but I will talk to you about the problem?
“I never got that far because a quick assessment of what I did would suggest that those issues were so interwoven that a bifurcation wouldn’t be possible.”
Martin was asked about the decision to fire Hyatt and Mooney, which McQueen discussed with the Oversight Committee at its Dec. 7 meeting.
Did the Oversight Committee explicitly approve the firing, or did it just say [to McQueen], ‘We won’t stop you from doing so?’
“My recollection is we acknowledged that what was happening from a human resources perspective was going forward. I don’t believe we approved that. …That’s my best recollection. As I think back on it, I don’t know why we would have to have approved it, because it was a human resource matter, a personnel matter…
“I can’t discuss with you publicly the personnel issues … but we did get a briefing on what Alan intended to do.”
Do you have any misgivings about the decision to terminate them?
“I thought that this was an appropriate decision for management to take. Recognize that as a board member I’m not involved in making that decision. This is not a policy decision. This is a personnel decision and this had worked its way through the various personnel levels. I felt that what was being requested was not unreasonable and I saw no basis for the Oversight Committee to refute what was getting ready to happen. It wasn’t our position to second guess the human resources structure.”
This was McQueen’s decision to fire them, not human resources, right?
“I’m assuming that it worked its way through human resources to make sure that all the T’s were crossed and I’s were dotted. That happens in any organization.”
SPP Headquarters Source: SPP
What is the process at SPP to terminate somebody?
“You’re asking for more detail than I can give you. The best I can do is to tell you this is a human resources function.”
Martin was also asked about the timing of the revised policy statement — which the committee approved Dec. 23, nine days after Hyatt and Mooney were fired — and the announcement of McQueen’s retirement. Martin announced the statement and the retirement at the January board meeting. McQueen, who has been with SPP since 2003, told RTO Insider he was leaving to spend more time with his grandchildren in northern Michigan.
A cynic would say SPP … got rid of the two malcontents but that looked kind of bad — they’re going to say they were fired for trying to assert their independence. ‘We [SPP] disagree with that and to show that that’s not true we’re going to put out this statement.’ But just in case FERC isn’t satisfied with that, Alan McQueen is going to be gone by the end of the year anyway so it’s going to be a moot point when the audit comes out.
[Martin smiles.] “Well, I can understand how somebody could look at all of the facts and extract that conclusion. But without getting into the details of why Alan McQueen elected to retire — and this was his election, let me be very, very clear with you. As a director I certainly am not aware of any desire to push Alan McQueen out. The Oversight Committee of the board has been very, very supportive of Alan and his role with the MMU. That’s a separate issue — his decision to retire.”
Why announce McQueen’s retirement in January when no date certain was given for his departure?
“It was announced at that time because a process had to be initiated for his replacement. That’s obviously going to be a public process.”
OK, but we’re now into May and I’m not aware that you’ve begun that process.
“The process of pursuing a replacement for Alan is not one that I’m directly involved in. That, too, is a staff function. But I wouldn’t assume because you haven’t seen a name emerge that the process isn’t underway.”
You’re saying that RTO management will choose McQueen’s replacement, not the board?
“Well, they’re going to do the mechanics of dealing with advertising the position and all of that. That’s where the process is going to be initiated. Ultimately, and obviously, the board is going to make the decision.”
When will the transition occur?
“Sometime this year. … What I can be clear about is the fact that it is his intention to be there until a replacement is in place. That much I can share with you. I just can’t be more specific.
“This is a very important role. You’ve obviously got to put the right person in that position, and I’m confident knowing that there isn’t going to be a vacuum there.”
What will you be looking for in a replacement for Alan McQueen?
“Really, a continuation of what we have right now. A very competent, talented MMU that’s able to satisfy its almost daily requirements from the FERC for information [and] also satisfy what Southwest Power Pool needs. An MMU that’s comfortable working through the Oversight Committee, which knows that we are available if there are some concerns and what have you.
“I’m looking for the kind of competence and expertise that would parallel the other RTOs and ISOs from around the country.”
Are there certain minimum academic or professional qualifications that you’re looking for?
“I can’t answer that question — simply because I haven’t seen the job description. If you were to ask me specifically do we want someone with a Ph.D. in economics, I don’t know that answer. Obviously Alan [who has a master’s in economics] doesn’t have one. A number of RTO/ISOs across the country do. I just don’t have an answer for that question.”
[Editor’s Note: Editor-in-Chief Rich Heidorn Jr. is a former member of FERC’s Office of Enforcement and participated in a 2008 audit of SPP.]
Former Monitors Dispute SPP Claims over ‘Contract’
Hyatt
Joshua W. Martin III, chairman of the SPP Board of Directors’ Oversight Committee, said he refused to meet with Market Monitors Catherine Tyler Mooney and John Hyatt last year because their letter requesting a meeting included a proposal that the RTO sign a contract with them to set up an external monitor.
SPP General Counsel Paul Suskie said in a statement that Hyatt and Mooney proposed that they would form their own company and that SPP would fund their startup costs and award them a no-bid contract — essentially the arrangement that PJM agreed to with Joe Bowring when he left the RTO’s payroll and founded Monitoring Analytics in 2008. (See Independent Market Monitors Wouldn’t Have It Any Other Way.)
Mooney said it was Suskie and MMU Director Alan McQueen who initiated the discussion of contracts. Although the letter recommends some MMU functions be transferred to an external monitor, which Hyatt and Mooney offered to join, the word contract is not mentioned.
“John and I felt that this was premature. The OC needed to make a policy decision about whether to pursue an external unit first,” she said. “We discussed whether an open request for proposals for an external MMU contract could be conducted in a way that would protect our careers given the retaliation we were experiencing. John and I never ruled out any options. We did not ask for a contract.”
If SPP had chosen an open solicitation, it’s unlikely it would have received many responses. When Texas issued a solicitation last year for monitoring of ERCOT, only incumbent Potomac Economics submitted a bid.
“We had very good jobs [at SPP],” Mooney said. “All we had to do to keep them was to keep our mouths shut. But we felt that was a compromise of our principles. … We felt that would compromise the SPP MMU’s integrity.”
Staff members are recommending that the Maine Public Utilities Commission not approve natural gas pipeline capacity contracts paid for by electric and gas customers.
Opponents of the Northeast Energy Direct pipeline marching in protest. (Source: PopularResistance.org)
An Examiners’ Report released last week said market changes since the price spikes of 2014’s polar vortex make it unlikely electric generators will make commitments for pipeline capacity in an effort to stabilize prices.
“The commission does not find that the market and rule changes to date are likely to alter the fact that the region’s generators do not make long-term commitments for pipeline capacity,” the report said, which is written as a draft order (2014-00071).
Maine’s Energy Cost Reduction Act, passed in 2013, authorized the PUC to execute “energy cost reduction contracts” for 200 million cubic feet of natural gas costing up to $75 million a year, if it found that the contracts would save ratepayers money. The law allows the PUC to administer and resell the pipeline capacity.
The report said that much has changed since the law was passed and that historic low prices for natural gas have removed the urgency felt two years ago.
It cited incremental gas pipeline construction projects that are coming online as a source of supply. (See FERC Denies Bid to Block Algonquin Pipeline Expansion.) It also said the Pay-for-Performance program created by ISO-NE to encourage greater reliability from New England’s power plants has altered the energy landscape by encouraging dual-fuel generation. (See FERC Denies Rehearings on ISO-NE Pay-for-Performance.)
The report comes two weeks after Kinder Morgan withdrew its application with FERC for the Northeast Energy Direct pipeline through New England, citing a lack of commitments from potential customers and an uncertain regulatory outcome for ratepayer financing.
“Hot on the heels of the recent downfall of Kinder Morgan’s massive pet pipeline project, this is an important victory on the path to stopping the patchwork effort across New England to build a polluting pipeline on the backs of consumers,” pipeline opponent Conservation Law Foundation said in a statement.
“We believe there is a strong case that electricity prices will be lower if the region has more gas pipeline capacity,” Tim Schneider, the state’s public advocate, told the Portland Press Herald. “This is why we supported Maine buying capacity as part of a regional effort. If Maine doesn’t buy capacity, it puts the regional effort at risk.”
Wholesale power costs in CAISO fell sharply last year as lower natural gas prices, increased solar generation and reduced loads more than offset the impact of a steep decline in hydroelectric output, according to a report from the ISO’s Department of Market Monitoring.
Solar output last year surpassed all other forms of renewable generation for the first time since CAISO began operation.
The ISO’s total cost of serving load decreased 31% to $8.3 billion in 2015, compared with $12.1 billion the previous year, the department said. Average wholesale costs dropped to $37/MWh from $52/MWh in 2014.
“Declining gas prices clearly had a role in the decrease,” Keith Collins, CAISO manager of monitoring and reporting, said during a June 7 call to discuss the report.
Collins noted that the 40% decline in California gas costs followed a national trend, with SoCal Citygate and PG&E Citygate prices falling along with the benchmark Henry Hub price. He also pointed out that, controlling for gas prices, CAISO power costs were down only 6% year-over-year, a decrease likely attributable to a sharp rise in output from low-cost solar. Lower congestion and increased virtual supply — which improved convergence between day-ahead and real-time prices — added downward pressure, the department said.
Last year also saw a seemingly contradictory movement between total loads and peak loads, with the former down and the latter up. Collins noted that a September heat wave produced CAISO’s highest annual peak load in five years, up nearly 5% from the 2014 peak.
Total and average load fell slightly for the year, continuing a trend of modest declines since 2012. The department attributed the drop-off to the growth of rooftop solar capacity, which the ISO estimates may have reached 4,000 MW last year.
Grid-connected solar reached a milestone in 2015, surpassing wind to become the largest source of renewable generation in the CAISO system. Solar output increased 38% during the year and accounted for nearly 7% of system energy. Wind output fell slightly, accounting for 5% of total supply. In 2014, solar provided less than 5% of system energy, below wind’s 5.6%.
Geothermal generation also accounted for about 5% of supply, gaining 24% over the previous year. The department attributed the increase to a group of geothermal units formerly outside CAISO’s footprint coming under its control.
In total, non-hydro renewables accounted for 18% of supply — not counting renewable imports — compared with 40% from natural gas and 8% from nuclear. Hydro (5%) and imports (28%) made up the balance.
While NV Energy did not join the CAISO-run Western Energy Imbalance Market (EIM) until the final month of 2015, Collins reiterated the ISO’s observation that the utility’s membership quickly unified what was previously a fractured market. (See NV Energy Has Smooth EIM Integration, CAISO Says.)
“The inclusion of Nevada really changed the dynamic of the market,” Collins said. The increased transfer capacity from NV Energy’s transmission network has significantly improved the link between CAISO and the PacifiCorp East (PACE) balancing area, creating more uniform pricing for imbalance energy, he said.
“We see the optimization creating a one-EIM price for those regions,” Collins said.
Other highlights of the report:
Hydroelectric output dropped for the fourth straight year in the face of extreme drought, falling to one-third the 2011 level. Snowpack in the Sierra Nevada mountains — a natural store for run-of-river hydro operations — was at 3% of normal on May 1, 2015.
Net imports fell 2% from 2014, mostly because of decreased imports from the Southwest. The department said the drop-off likely stemmed from lower price differentials between Southern California and the Palo Verde trading hub in Arizona.
Intervals of negative pricing in Southern California during the second quarter were attributed to combined surpluses of wind and solar generation during a period when outages on the Path 15 transmission line limited flows to the northern part of the state. Negative prices in the 15-minute market occurred in about 4.7% of intervals during that quarter, compared with an average of 2% for the year.
New York could accommodate up to 4,500 MW of wind generation and 9,000 MW of solar photovoltaic capacity by 2030 with no system reliability issues, according to a NYISO draft study released last week.
The backdrop to the “Solar Integration Study” is New York’s Reforming the Energy Vision initiative, which promotes adoption of cleaner and more distributed energy resources as well as state incentives that promote rooftop solar generation. New York’s Clean Energy Standard also mandates the state derive 50% of its electricity from renewables by 2030. (See Cuomo: 50% Renewables by 2030, Keep Nukes Going.) The NYISO study focuses on system impacts — rather than the costs or economics — of renewable energy.
A National Renewable Energy Laboratory study this year found that New York has the potential to install 46.4 GW of rooftop solar PV — which represents the upper limit of potential installations rather than a prediction, the study notes.
“The growth of solar PV energy as a source of electric generation is being strongly influenced by various public policy initiatives, including programs established by the State of New York in the State Energy Plan,” NYISO said.
The NYISO study included:
Development of hourly solar profiles and a 15-year solar PV projection by zone in New York;
“Lessons learned” and integration studies from other regions experiencing significant growth in solar and wind resources;
The impact of various levels of solar PV and wind penetration on the state’s grid regulation requirements; and
Potential reliability concerns associated with the frequency and voltage ride-through characteristics of solar installations.
The study points out that the $1 billion NY-Sun Initiative announced in 2012 will yield 3,000 MW of solar PV for the state, more than 500 MW of which had been installed by the end of 2015.
“As the penetration levels of solar PV and wind increase, any projected increases in regulation requirements are relatively minor and can readily be accommodated within the current market rules and system operations,” the study says.
The study recommends that NYISO advocate for industry standards requiring solar inverters to have voltage and frequency ride-through capabilities and request that the state establish similar requirements for the non-bulk power system.
NYISO says the study will lay the groundwork for additional research by the ISO.
PJM CEO Andy Ott on Friday announced organizational changes that will give additional responsibilities to senior vice presidents Stu Bresler and Vince Duane — a move Ott had foreshadowed following the departure of Executive Vice President and Chief Operations Officer Mike Kormos in March.
Bresler, who has been overseeing the Markets Division, will add the Operations Division, formerly overseen by Kormos, to his duties. Vice President Mike Bryson will continue to lead Operations.
The newly formed Law, Compliance and External Relations Division will report to Duane, the RTO’s general counsel, and include the State & Member Services Division and the Compliance Division, which already had been moved under Duane’s supervision earlier this year. Vice President Denise Foster will continue to lead State & Member Services.
The new division will address legal and regulatory components and oversee communications with various audiences.
“We are making some changes to our structure as our organization continues to grow and evolve,” Ott said. “Our objective with this realignment is to better serve our stakeholders by positioning internal processes — and those conducting them — to better support company strategies.”
New York policymakers grappled last week to find the most cost-effective way to reach the state’s 50% renewable energy target by 2030 while maintaining a competitive electricity market.
The New York Public Service Commission held a technical conference June 9 to discuss the state’s proposed Clean Energy Standard, the roadmap intended to transition the state away from fossil fuel — and eventually nuclear — generation (15-E-0302).
“Without question, thinking about how we are going to get new resources into our mix is key to our success,” PSC Chair Audrey Zibelman said.
At the conference, industry stakeholders debated whether power purchase agreements, renewable energy credits or some combination of both would be the best way to achieve renewable goals without exposing consumers to price risks in an environment of low natural gas prices. The state is moving away from the current centralized procurement by the New York State Energy and Research Development Authority.
Under both the PPA and REC approaches, the total payment per megawatt-hour, including energy and capacity, would be set at the start of the project. Under fixed-price RECs, the generator would be exposed to fluctuations in commodity value (energy and capacity revenue).
Under a bundled PPA, ratepayers would accept commodity price risk, with the net program cost determined based on the difference between the PPA and energy and capacity values. “Where at any point in time the value of energy/capacity exceeds the contracted PPA amount, the program cost per megawatt-hour becomes negative (i.e., [load-serving entity] customers benefit from paying the renewable electricity generator less than the market value of energy and capacity),” explained the PSC staff’s cost study, which was released in April.
The study assumed PPAs and RECs would be used equally to procure the 5.2 GW of Tier 1 renewables envisioned by 2023. Those resources would be dominated by land-based wind (38%) and solar power developed under the NY-Sun initiative (52%). The remainder would be supplied by utility scale solar, bioenergy, hydropower, imports and offshore wind. (See NYPSC: Minimal Cost to Meet 50% Renewable Goal.)
New York currently has about 2.5 GW of renewables: almost 2,000 MW of wind resources and 500 MW of solar.
Gavin Donohue, president of the Independent Power Producers of New York, said the REC-only approach is what brought the state to its current level of success. “It takes the risk away from ratepayers and puts it solely on … the generator sector,” he said. “We feel very strongly that if it’s not broke, don’t fix it.”
Donahue said long-term fixed contracts wouldn’t permit consumers to benefit from innovations that might lower power prices.
“The PPAs don’t reflect the changes over the long term in the marketplace,” he said.
Anne Reynolds, executive director of the Alliance for Clean Energy New York, said developers who belong to her group say the current REC model has limitations.
“Yes, the REC-only approach has gotten us a good deal of renewables built, but if you look at the pace of what we’ve accomplished over the past 10 years, it is not enough to get us to 50%,” she said.
“We think the way to do that is to attract the maximum number of developers we can to New York so that you get a robust lineup of projects and you get good competition.”
Consumers would benefit from long-term low prices and generation that doesn’t rely on fossil fuels, she said.
WASHINGTON — A standing-room-only crowd got a glimpse of the grid of the future — and what’s keeping us from getting there — at last week’s Energy Bar Association Annual Meeting.
The session was titled “Tomorrow’s Grid is Here.” But in their description of the technical, regulatory and behavioral obstacles, some members of the panel seemed to want to add the word “almost.”
“Electricity is a public good. Yet the system we’ve got is going through a huge transformation and from my perspective there’s no one at the helm,” said Malcolm Woolf, former head of the Maryland Energy Administration who is now senior vice president with Advanced Energy Economy, a national business association.
“Utilities are doing exactly what they’re supposed to do based on historic incentives, but those may not be right for what we want today. The federal government is largely deferring to the states … and the states don’t really have the capacity to drive this. They don’t really know what they want.
“With the exception of a few states like New York and maybe California and Hawaii … I don’t think those conversations are going on.”
Woolf said policymakers need to stop thinking of the grid as “a long extension cord” with centralized generation and one-way power flow to a “market-maker network … where you’ve got a lot of distributed generation, a lot of centralized generation, all integrating to help our reliability and resiliency.”
Corporate America has moved more quickly than regulators, Woolf said. “Sixty percent of the Fortune 500 have renewable and climate goals, yet it’s only a handful that are going to be able to do deals because in most of the country it’s really hard to do deals. In North Carolina, the SolarCity — solar leasing — model is not legal. In Maine [and] still vertically integrated states, you can’t do offsite [power purchase agreements]. Talk to eBay who passed an offsite PPA bill three or four years ago in Utah and still hasn’t been able to get the project up and running.
The “MGM [Grand hotel and casino] in Vegas has just decided to go off grid and pay a massive $80 million penalty to NV Energy because they just want to self-generate,” he continued. “There’s a whole array of state barriers because no one thought that business wanted their own solution.”
Among the speakers was Deputy U.S. Assistant Energy Secretary Michael Pesin, who described the “three-legged stool” of research and development: technology, policy and markets. Rudolph G. Terry, director of the Philadelphia Industrial Development Corp., gave a presentation on the conversion of the Philadelphia Navy Yard from a defense installation to an urban industrial campus with its own microgrid.
Providing the utility perspective was Robert Stewart, manager of smart grid and technology for Pepco Holdings Inc.
Pepco has 26,000 net metering customers (360 MW of solar capacity) and is receiving 1,000 applications a month. It can’t accept them in some rural areas of New Jersey served by 12-kV lines. “We have five feeders that were closed [to new solar],” he said, adding that technical fixes will allow at least some to reopen eventually.
Stewart also talked about the potential impact of electric vehicles, and how to make them practical for low-income drivers who could benefit from their low maintenance and operating costs.
“The problem is most of these people live in multi-dwelling units. They can’t have their own charger. So rather than try and solve the issue with multi-dwelling units, if you gave them access to a charge someplace else — workplace charging through DC direct fast charge, [or] they stop and get a cup of coffee [and] top it off — it’s more like an appliance to them.”
Pepco faces another challenge in older, wealthier suburbs with high concentrations of EVs, such as Maryland’s Montgomery and Prince George’s counties. Because EVs draw about half the power of a full home load, such areas are at risk of overloading their transformers, Stewart said.
Based on a pilot program, Pepco believes most EV drivers will plug in between 4 and 8 p.m., increasing the afternoon peak load.
The company hopes to spread the load through time-of-use rates, which Stewart said could save the owner of a Nissan Leaf $300 a year. But utilities have a hard time making their case, he said.
“Even though you sit there with the numbers and you try to prove to them all you have to do is not charge between noon and 8 p.m. and you get [savings], the customer still is not with you,” he said. “They think there’s something behind the scenes. It’s too good to be true and the utility is really just trying to rip them off.”
VALLEY FORGE, Pa. — The PJM Market Implementation Committee will hold a special meeting June 29 to continue discussion about the process for approving fuel cost policies and redefining terms, including “market seller.”
The changes, which stem from an annual review of Manual 15, were on the MIC’s agenda for endorsement Wednesday, but after spending one and a half hours talking about them, members asked to continue to work the issue.
One of the topics of discussion was new language added to clarify that the “market seller is the entity that submits a cost-based offer and is responsible for maintaining all information necessary to calculate resource’s cost-based offer.”
Members said they wanted to make sure that any new definitions were consistent with the Tariff.
Catherine Mooney of Monitoring Analytics also proposed language changes on behalf of the Independent Market Monitor.
“The purpose of Manual 15 is to develop the primary input for market power mitigation. This is one of the Market Monitor’s primary responsibilities,” she said.
In a case where a market seller is an agent of the generation owner, it needs to have access to all of the information required to not only calculate but also support a cost-based offer, she said.
Mooney also introduced language that would clarify the Monitor’s authority in evaluating fuel cost policies.
More Flexible Parameter Limited Exception Process Approved
The committee, with two abstentions, endorsed a proposal to make the parameter limited schedule exception process more flexible.
“The most important goal is to solve the problem of inflexibility,” PJM’s Tong Zhao said. (See “Manual Changes to Detail Unit-Specific Operating Parameter Adjustment Process under CP,” PJM Operating Committee Briefs.)
The revisions allow generators to request an exception if they learn of a need after the Feb. 28 deadline. They also permit a temporary exception to be extended to a period or a persistent exception if the need arises after the deadline.
In addition, the changes give PJM and the Monitor more time to review requests and give their determinations to market sellers.
Retroactive Black Start Billing Charges Focus of Proposed Study
PJM’s Tom Hauske introduced a problem statement and issue charge designed to mitigate the potential for large, retroactive black start charges.
Currently, the Tariff does not address when the Monitor will review the costs for new units entering black start service outside of the annual revenue recalculation period.
A number of new units have recently entered black start service, many replacing retiring units. To ensure PJM had sufficient resources, most of these new units entered service before their initial capital costs and annual revenue requirements were approved by the Monitor — some with a lag of six months or longer.
That resulted in significant charges to load in April.
“We would all benefit from more transparency. … If you have these things under review for a period of time and they’re accumulating charges, we’d like to see how large that accumulation might be,” said Jeff Whitehead of Direct Energy. “If we could minimize it, that would be good. If we can’t, we need to at least understand what the liability is going to be.”
“The back charges were a shock to our members and clients,” added Carl Johnson of the PJM Public Power Coalition. “Even if we don’t know what the scope of that is going to be, just knowing it exists is helpful.”
“There are more coming,” Hauske replied. “We can come up with an estimate.”
Conference Call Set to Discuss Auction-Specific Bilateral Transactions
A special MIC conference call will be held June 24 to discuss proposed clarifications to auction-specific bilateral transactions.
Assistant General Counsel Jen Tribulski said the changes aim to preserve the physicality of the transactions and ensure members’ indemnification.
The new rules assign auction credits and bonus payments to the buyer, while the seller retains the obligation to perform. (See “PJM Proposes Clarifications to Bilateral Transactions,” PJM Market Implementation Committee Briefs.)
Members said they wanted more information on the clarifications.
Committee Endorses Two Problem Statements from Members
With little discussion, the committee unanimously approved:
A problem statement and issue charge presented by Bruce Campbell of CPower to review the demand response registration submission deadline. (See “CPower Proposes to Study Necessity of DR Registration Submission Deadline,” PJM Market Implementation Briefs.)
A problem statement and issue charge from Direct Energy’s Whitehead and Sharon Midgley of Exelon to discuss potential enhancements to the residual auction revenue rights process. (See “Exelon, Direct Energy Suggest Studying Residual ARR Process,” PJM Market Implementation Committee Briefs.)
SPP and MISO have ended months of uncertainty by agreeing to a second joint system study, which will take a “targeted” look at the two entities’ newly created Integrated System seam in the Upper Midwest.
SPP staff told the Seams Steering Committee, which met in Dallas on June 8, that the MISO members of the Interregional Planning Stakeholder Advisory Committee (IPSAC) voted last month to pursue the study. The Joint Planning Committee, composed of SPP’s David Kelley, director of interregional relations, and MISO’s Eric Thoms, manager of planning coordination and strategy, made it official May 31 when the two agreed to begin the study.
The RTOs conducted their first joint study last year, identifying three potential interregional transmission projects. However, they were unable to reach agreement on pursuing any of them. (See SPP, MISO Conclude Joint Study Empty-Handed.)
SPP’s interregional coordinator, Adam Bell, said both staffs have begun discussions on the study’s scope. He said the staffs are planning to discuss the draft scope at a possible IPSAC meeting in July and hopes to wrap up the study in the first quarter of 2017.
Kelley told the committee both staffs have a “desire” to do a larger study, but they are constrained by lack of manpower.
Bell said SPP will continue discussions with MISO to incorporate process improvements identified by stakeholders during the IPSAC’s March meeting.
Staff told the committee the study is focused on five “target areas” in AECI’s footprint where there have been recurring operational problems:
Northeast Oklahoma (potential overloads, voltage issues);
Southwest Missouri (potential overloads, voltage issues);
Central Missouri (potential low-voltage issues);
Wheaton area, southwest Missouri (potential upgrades); and
Mid-Missouri (potential low voltages).
“The scope was intentionally left broad to give us the flexibility we need to create these … areas and most efficiently target them,” Bell said. “Some stem from operational issues we see regularly that aren’t showing up in typical planning areas.”
The models are to be developed by the end of July, with preliminary results due in November and a final report in January.
Committee Recommends SPP Intervene in FERC’s NIPSCO Docket
The SSC unanimously endorsed a motion recommending SPP intervene at FERC in an ongoing dispute between MISO and PJM over their interregional planning (EL 13-88).
MISO and PJM have until June 20 to submit a compliance filing responding to an April 21 order in which the commission partially denied and granted a 2013 complaint by Northern Indiana Public Service Co. over the RTOs’ processes. (See MISO, PJM Working to Comply with NIPSCO Order.)
SPP’s options are limited because it did not intervene before the order was issued. Given choices between intervening out-of-time, commenting on MISO’s eventual compliance order or petitioning for a declaratory order, the committee voted to recommend the RTO “intervene out-of-time without comments but justification.”
“It’s really hard to come in at this late stage and ask for standing in the case,” Kelley said. He suggested SPP could intervene once MISO and PJM make their filing and potential Tariff changes.
The vote was partially driven by SPP member ITC Holdings’ intervention in the case. ITC, one of seven intervenors to request a rehearing of the order, said the commission should clarify that its directives to MISO also apply to potential interregional economic projects along the SPP-MISO seam.
FERC directed MISO to lower its interregional project voltage threshold with PJM from 345 kV to 100 kV and remove the $5 million minimum cost requirement. MISO currently has the same 345-kV threshold for economic projects along its seam with SPP, which has limited the ability of the entities to agree on interregional projects.
Staff reminded members that FERC is under no obligation to accept ITC’s request or clarify the applicability issue.
“My analysis leads me to believe … the commissioners probably won’t answer ITC,” SPP attorney Matthew Harward said. “If it grants ITC’s request for clarification, that could potentially impact SPP.”
Harward said he understood that several motions opposing ITC’s request have been filed, but he had yet to review them.
Kelley said MISO staff has told him the RTO is “taking the policy position that these things do not apply” to SPP and MISO and that the order is related only to the MISO-PJM seam.
Harward seemed to agree. “The order is narrowly drawn for the PJM-MISO seam,” he said.
The New York Public Service Commission held a technical conference June 9 to discuss the state’s proposed Clean Energy Standard, the roadmap intended to transition the state away from fossil fuel — and eventually nuclear — generation (15-E-0302).
SPP staff told the Seams Steering Committee, which met in Dallas on June 8, that the MISO members of the Interregional Planning Stakeholder Advisory Committee (IPSAC) voted last month to pursue the study. The Joint Planning Committee, composed of SPP’s David Kelley, director of interregional relations, and MISO’s Eric Thoms, manager of planning coordination and strategy, made it official May 31 when the two agreed to begin the study.